Cars

Tesla Motors shares soar 41% in market debut

MattAndrejczak

SAN FRANCISCO (MarketWatch) -- Tesla Motors shares shot nearly 41% higher Tuesday in their first day of trade, an enthusiastic reception for the Silicon Valley electric car marker in sharp contrast to steep declines elsewhere in the equities market.

The stock opened at $19 a share, 12% above the $17 offer price. After briefly pulling back to $17.54, it staged a full-blown rally that carried it briefly to $25 a share.

Tesla
TSLA, +0.81%
shares closed at $23.89, an advance of $6.89, or 40.5%, in a session that saw the Dow Jones Industrial Average
DJIA, +0.38%
fall more than 268 points to 9,870.

Tesla, the first American car maker to go public in half a century, priced the deal one dollar above the initial offer price of $14 to $16 a share.

The maker of the Roadster sports car raised $202 million from the sale of 11.88 million shares. Insiders, including 38-year-old Chief Executive Elon Musk, collectively sold an additional 1.4 million shares in the deal.

Musk reaped an IPO payday of $15.3 million based on the 900,212 shares he sold, according to a regulatory filing.

Tesla on Monday boosted the share offering by 20% to 13.3 million shares due to strong demand. The company's selling shareholders granted the deal underwriters a 30-day option to buy an additional 1.995 million common shares to cover any overallotments. In all, the IPO could be worth $260 million.

For some, Tesla's IPO harkens back to Silicon Valley's Internet bubble in the late 1990s, when retail investors snapped up shares in brand-new tech companies with no track record of making any money.

He pointed to last September's IPO of A123 Systems Inc., a maker of lithium-ion batteries for hybrid vehicles. A123
AONE
shares spiked on their first day of trading, but the stock has now fallen 27% from its $13.50 offer price.

"There are enough problems with the financials," Sweet said of Tesla. "The euphoria will likely fade soon given the cost of this vehicle in the recessionary environment. There is a very limited market for Tesla's cars."

Tesla has yet to earn a dime since it was founded by Musk and Chief Technical Officer J.B. Straubel in 2003. The company has lost almost $300 million since inception, and does not expect to make a quarterly profit until at least 2012.

"The investment is a risk for investors, but some risks pay off," said Edmunds.com Chief Executive Jeremy Anwyl. "Even if this doesn't turn out well for investors, it's good for the country that Tesla has gotten so much attention for its innovative efforts."

Tesla is hoping to tap growing interest from consumers and governments for hybrid and electric vehicles in an era of high oil prices and concerns about the impact of gas-fueled cars on the environment. The U.S. government wants to put 1 million electric cars on the road by 2015 and offers consumer tax credits of up to $7,500 per alternative-fuel vehicle. Read MarketWatch First Take on Tesla's believers.

Tesla's top-end Roadster, which sells for more than $100,000, has attracted attention from Hollywood's "A-list" stars, among other movers and shakers, and the U.S. Energy Department has backed it with a $465 million loan. But the company is pinning hopes of future profits on sales of a mass-market Model S sedan.

The Model S carries a price tag of $50,000, after a federal tax credit. So far, 2,200 would-be buyers have plunked down a $5,000 refundable deposit for the five-passenger car.

Volume production of the Model S is slated to begin in 2012 at a recently shuttered Northern California auto plant it bought from Toyota Motor Corp.
TM, +0.20%
for $42 million.

Tesla is selling $50 million in shares to Toyota immediately after the IPO as part of a broader partnership with the Japanese auto maker.

Based in Palo Alto, Calif., Tesla has 646 employees. It plans to expand its network of 12 retail showrooms in the United States and Europe to 50 worldwide to accommodate its rollout of the Model S. On Thursday, Tesla will open a showroom in Copenhagen.

Tesla's Musk has had success in the past with startups.

The executive founded Tesla after helping launch PayPal, an electronic-payment system acquired by eBay Inc.
EBAY, +0.35%
in 2002, and Zip2 Corp., a provider of Internet-enterprise software that was acquired by Compaq in 1999.

Musk, according to a company filing with the Securities and Exchange Commission, intends to emerge from the IPO with a 28% stake in Tesla.

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